Where to begin?

America’s healthcare industry has grown so large it seems nearly impossible to control. The industry consists of direct care providers, hospitals, outpatient facilities, insurance companies, pharmaceuticals, medical equipment, researchers, and investors. It also includes lobbyists and politicians. And, of course, customers. The healthcare industry is a behemoth of interested parties with various motivations, most of them money related.

America is designed to be a capitalistic nation, meaning the economic engines of the country are driven by privately owned businesses that operate for a profit, with prices being pushed and pulled by supply, demand, and competition. For the most part this remains true, but since the beginning of the nation, America’s economy has also found itself needing to rely often on the government for support. And patronage. For instance, there would be no defense industry without having the government for a customer. America has become a hybrid of public-private partnerships for a lot of things in a lot of ways for the benefit the economy, by means of necessity.

The American healthcare industry is a capitalistic industry, but with some sociologic policies added in over time. The Food and Drug Administration was created for general safety measures. Medicare and Medicaid was created for governmental assistance with the healthcare needs of certain populations. Numerous regulations and care facility inspections were created for more safety measures. But the healthcare industry retains it’s capitalistic profit-focused structure, with exceptions. Many hospitals are non-profit for tax incentives. Many are for profit. The private healthcare insurance market is bound by regulations, but this can vary from State to State. The Affordable Healthcare Act insurance providers are required to pay a percentage of the premiums they collect out in claims and reimburse the policy holder if they do not meet their stated threshold. This does help with premium price discovery.

I asked Google’s Gemini for more info on this:

That depends on the type of health plan, but generally, federal law requires health insurers to meet a minimum Medical Loss Ratio (MLR), which dictates the proportion of premium revenue that must be spent on medical claims and quality improvement activities.  

The requirements, established by the Affordable Care Act (ACA), are:

• 80% MLR for health insurance plans in the individual and small group markets (small groups typically defined as up to 100 employees).
• This means at least 80 cents of every premium dollar must go toward health care services and quality improvements.  
• The remaining 20% can be used for administrative costs, overhead, and profit.  
• 85% MLR for health insurance plans in the large group market.
• This means at least 85 cents of every premium dollar must go toward health care services and quality improvements.  

💰 What Happens if the MLR is Not Met?

If an insurer does not meet the minimum MLR in a given market and state, they are required to issue rebates to the enrollees (customers) of those plans. The rebate is proportional to the difference between the actual MLR and the required threshold.  

Note: The MLR is calculated based on a three-year rolling average of the insurer’s finances within each state and market segment, not on individual policy performance. Also, the MLR rules generally do not apply to self-funded health plans (where the employer assumes the risk for claims).

A few skeptical points here would be (1) “quality improvements” is a very generic term that could be taken advantage of in many ways (2) “healthcare services” could be taken advantage of by healthcare providers on unnecessary things, (3) “administrative costs, overhead, and profit” can be bloated on unnecessary management layers, documentation and clerical work, and (4) non-ACA insurances provided by many employers are not held to the same standards and have less consumer protections. All of these are variables that are affecting the price of healthcare services and insurance premiums.

Additional advantages the healthcare industry enjoys is the absence of robust competition. The American citizen is restricted in access to the healthcare system depending on which insurance they are covered by, if they have insurance at all. Not all insurance plans available are available to all citizens to chose from. The citizen must deal with the “in-network” and “out-of-network” cost differences. And once a citizen finds the need to utilize healthcare services, they are usually ushered into a black-box system that tells them what to do and where to do it according to their insurance status. Many times a chronically compromised person seeking healthcare is advised to go to the Emergency room if they need services as soon as can be arranged, even if this truly is not necessary. It’s just more convenient for doctors and definitely more expensive.

The American citizen is unable to shop around for recommended services, prices aren’t advertised, and the patient’s preferred choice of doctors may not be accessible to them. Consider needing a specific surgery, researching and finding a particular surgeon you would like to use for your operation, and that surgeon is not in your health plan. The sum of all of this equates to escalating prices and limitations that cannot be controlled by market forces, which is an imperative part of capitalism.

Several other countries in the world also have capitalistic healthcare systems or have varying degrees of a hybrid system. According to CoPilot:

🌍 Other Capitalistic Healthcare Systems

Several nations operate healthcare systems that rely heavily on private ownership, market competition, and profit motives, though often with stronger regulation or universal coverage than the U.S.:

• Switzerland:
  • Healthcare is delivered through private insurance companies.
  • Citizens are required by law to purchase insurance, but insurers compete in a regulated market.
  • The system is capitalistic but ensures universal coverage through mandates.
• Germany:
  • Uses a mix of public and private insurance.
  • While most people are covered by statutory health insurance, private insurers compete for higher-income individuals.
  • Hospitals and providers include both public and private ownership.
• Singapore:
  • Healthcare financing is based on mandatory savings accounts (Medisave) and private insurance.
  • The government regulates costs but encourages competition among providers.
• Chile:
  • Citizens can choose between public insurance (FONASA) and private insurers (ISAPREs).
  • Private hospitals and insurers operate in a competitive market.
• South Korea:
  • While the government provides universal insurance, most hospitals are privately owned and profit-driven.
  • This creates a hybrid system with strong capitalist elements.

⚖️ Key Difference with the U.S.

• The United States stands out because it lacks universal coverage and relies more heavily on profit-driven insurance and providers.
• Other capitalist democracies (like Switzerland or Germany) balance market competition with universal mandates or strong regulation, ensuring access while maintaining private ownership.

📌 Bottom Line

The U.S. is not unique in having a capitalistic healthcare system, but it is unusual among wealthy nations in how little government intervention ensures universal access. Other countries combine capitalism with mandatory insurance or public safety nets, creating systems that are both market-driven and broadly accessible.

Let’s go back in time a bit and look at health insurance history in America. Health benefits of some sort started in the late 1700’s for seamen and grew to include coverage for lost wages of workers in the event of an accident in other industries. Employer-provided insurance benefits really became mainstream after World War II as a means of companies being able to attract workers in an time when wages were restricted by law. In the 1950’s, the U.S. government solidified this practice by making the benefit tax-exempt for the employer. Employer-provided healthcare insurance remained the status quo of the country until the implementation of the Affordable Care Act in 2010, with the exception of Medicare and Medicaid that became law in 1965.

Employer-provided healthcare insurance, while it fills a need, has several disadvantages. The most obvious, again, is the lack of competition in the insurance market. The employee usually has a limited number of plans to chose from, or they may not even have a choice; smaller employers often offered only one plan. Still, many small employers were unable to afford healthcare benefits at all for their workers, so many American citizens lived uninsured. The price of premiums escalated while employers were willing to brunt the costs, but even this quickly got to the point where the employee became required to contribute a portion of their wages to pay for the expensive premiums. It is now expensive for both the employer and the employee. In addition, insurance companies were further allowed to discriminate against pre-existing conditions and limit how much they would pay for one individual’s lifetime because they gained the power to do so.

Let’s pivot back to the “in-network” and ‘out-of-network” phenomena. Again, limited competition. But there are some things going on here that seem like game-playing. It becomes clear when examining an Explanation of Benefits (EOB) statement, and it goes like this:

The direct care provider charges “X” amount, in-network insurance “adjustments” are “Y” amount, the insurance provider pays “Z” amount, and the patient responsibility is the remainder. Now, these numbers can be eye-popping. And head scratching. For instance, my current ACA insurance plan that I chose is one that has low premiums and I basically pay 25% for all healthcare services except for one primary care visit per year and preventative screenings. My last Quest lab bill for just a few simple tests was broken down as follows; the tests added up to $623.14 in charges, but because I had in-network insurance there was an adjustment of -$587.98. The insurance company paid nothing (not sure why not) and I was billed $35.16, which I gladly paid. (Obviously, the lab will still make a small profit on the $35.16 – they are not in the business of losing money). But what if I didn’t have insurance? I would be billed $623.14.

I know a lot of people think that healthcare providers give the uninsured a break, but I’m here to tell you they do not. I have been in that situation before and had to write big checks to providers for care. I even had an endocrinologist tell me they would not keep me as a patient if I remained uninsured, even though I was willing and able to pay their fee. That didn’t seem very fair. After all, they are willing to accept only a fraction of their fee from insurance reimbursement, but not the full fee from me. Go figure. That says a lot. Something else is going on.

If we could eliminate the “in-network” and “out-of-network” pricing models, and charge all healthcare customers, insured or not, the same discounted “adjusted” price for all services, maybe healthcare insurance could become more of a catastrophic policy than a health maintenance policy. Think of policies designed with protections for new diagnoses that would be financially devastating, such as cancer or birth defects, and acute events like heart attacks, strokes, and traumas. Routine care like labs, diabetes and congestive heart failure management, physical therapists, and the like, should be out-of-pocket affordable without insurance. Just charge all patients a comparable “in-network” patient responsibility price.

This brings up another conversation. Individuals should take more responsibility for their own health, especially if they want to save money. Another fair possibility is to charge individuals who display greater health risks more for their policies than those who lead healthier lifestyles. Think of obesity, high cholesterol levels, and alcoholism as risk factors that would increase plan premiums. This is already done with smokers. It would be a great incentive for citizens to optimize their health, which in aggregate would decrease the burden on the healthcare system and costs as a whole. True, those with common chronic ailments due to no fault of their own would be paying more, but a fair cost balance is still possible to find, maybe even more assistance for these folks.

In full disclosure, I have no insight as to how and why the healthcare insurances and providers interact as they do. But this I am certain, lots and lots of money is spent in this sector that is not directly related to direct patient care, and profits are hefty. Of course healthcare delivery is expensive, but it can feel as though the healthcare industry is in business to serve itself instead of providing world-class services to American healthcare consumers. It can seem as if spiraling prices are an inside job.

I know some of these discussions can be considered overly-simplified and there are probably exceptions to every statement made, but changes do need to be made in the healthcare industry. It can also be acknowledged that the average lay person does not know what is involved with competent healthcare services for their particular needs and depend on the professionals to guide the way. Maybe Basic Healthcare 101 should become part of the standard American educational system so citizens can become more knowledgeable on common needs and ailments and be a more proactive partner in their care. Perhaps this could even reduce litigation when the consumer is allowed to make some decisions and take responsibility for them. But the healthcare consumer needs to become the priority again in the healthcare services industry, not the industry itself.